All We Want for Christmas is a Level Playing Field

During the outset of this holiday shopping season two record-breaking sales days have benefited online retailers.  Online sales during Black Friday exceeded $1 billion for the first time in history, and this past Cyber Monday was the biggest online shopping day of all time – with sales in the neighborhood of $2 billion.

In the modern-day retail marketplace, online retailers are ubiquitous, enjoy ease of access to consumers, and as this year’s Black Friday online sales and Cyber Monday sales demonstrate, these sellers enjoy great success.  Unfortunately, under existing law, online retailers enjoy something else – an inherent competitive advantage over brick-and-mortar retailers.

When a brick-and-mortar jewelry store sells an engagement ring, that store is required to collect sales tax.  However, when an online-only retailer sells the same engagement ring, that retailer is not required to collect sales tax.  To address this grave disparity in the treatment of brick-and-mortar versus online retailers under our current system, bipartisan coalitions in Congress have introduced the Marketplace Equity Act in the House and Marketplace Fairness Act in the Senate.

Both bills would give states the authority to require online retailers to collect sales tax on remote sales from the consumer and remit that tax to the consumer’s state.  This is not a new tax.  Rather, it is an existing but often uncollected tax.  Most consumers do not understand they are required under current law to remit sales tax for online purchases when the seller does not collect and remit sales tax.

If online retailers sell the same jewelry pieces to the same customers in the same neighborhoods as brick-and-mortar jewelers, then they should be required to adhere to the same tax laws – plain and simple.

Opponents of existing e-fairness legislation claim to be champions of small business and free market principles.  If this is indeed the case, then why are these critics such ardent proponents of an inequitable system that creates an economic incentive for consumers to buy a desired product online instead of from a brick-and-mortar store?

I applaud the efforts of the cosponsors of the Marketplace Equity and Marketplace Fairness Acts to restore competitive balance to the retail marketplace.  With the holiday shopping season in full swing, and as brick-and-mortar small businesses struggle to remain viable in an uncertain economy, I can think of no more appropriate time for Congress to once and for all put an end to an unjust and outmoded loophole in our sales tax laws.

Matthew A. Runci is the President and CEO of Jewelers of America (JA) in New York, N.Y.  JA is the national trade association for businesses serving the fine jewelry retail marketplace.  Its membership includes approximately 3,300 retailers and suppliers with over 10,000 retail storefronts in all 50 states and Washington, D.C.  Over 90% of JA’s members are single-store operators.

It’s time to dispel the myth of “tax-free online shopping”

The market is the only thing that should be determining winners and losers when it comes to American businesses. Yet, since the early 1990s this has not been the reality for brick-and-mortar businesses across the country.  The 1992 Supreme Court ruling in Quill Corp vs. North Dakota have prevented states and communities from requiring sales tax collection from vendors not physically within their borders.  The effect has been a chronic and persistent imbalance in prices between online vendors and their brick-and-mortar counterparts. The exclusion of sales tax at the state and local level allows online vendors to offer prices 5-8% lower across the board. This lower pricing not only puts brick-and-mortar retailers at a disadvantage, it also deceives the consumer.

The subtle reality is that the Supreme Court’s ruling does not eliminate sales tax for online purchases; it merely allows online vendors to push that burden onto consumers.  The consumers still owe the tax, and so they aren’t actually saving money when they purchase from an online retailer rather than at a store like mine.  To be clear, under current law, consumers are required to write two checks for every one online transaction where the sales tax is not collected: one check to the vendor and one check to the state/local revenue service.  This is not only inconvenient, it is ridiculous.

Some online businesses have and will continue to complain that collecting and remitting sales tax to all 50 states with various rates and laws is too cumbersome and time consuming.  But the truth is that affordable and easy-to-use software exists that will do this for them.  What’s actually cumbersome is for consumers to track, calculate and report each every online purchase and submit the tax to state and local revenue services.  Brick-and-mortar stores are required to this for their consumers.  It shouldn’t be any different for online vendors.

It’s high time for our elected representatives in Washington, D.C. to level the playing field by passing the Marketplace Fairness Act and the Marketplace Equity Act.  Doing so will not only level the playing field for brick-and-mortar retailers in Michigan and across the country, but will also dispel the myth of “tax-free online shopping” and make life easier for consumers.  That’s something we should all be able to get behind.

Dan Marshall is the 2nd generation operator of a family-owned chain of music stores called Marshall Music, with seven brick-and-mortar stores located throughout Michigan.

Online Sales Tax Loophole Slowly Killing Small Businesses

Like many small businesses, mine is a family affair. My father George and my mother Sylvia entered the bookselling business more than 30 years ago in an old gas station. For three decades our family has nurtured and grown Givens Books and later Little Dickens into the successful businesses they are today.

But local businesses like mine and the communities they serve are facing a serious threat from online retailers who are exempt from collecting sales tax.

It’s time for Congress to address the online sales tax collection issue.

When online businesses without a physical presence in the state circumvent sales tax collection, they pull customers away from Main Street retailers like my business, where our friends and neighbors work, local products are sold and taxes collected. These sales taxes, in turn, go to local schools and a myriad of infrastructure projects. In addition to the attrition of locally owned and operated businesses, which constitute the backbone of our communities, badly needed revenues are also lost because of this unfair loophole for online-only retailers. This year, Virginia will lose over $200 million in uncollected sales tax revenue. The most hurtful irony in this whole saga is that the lost revenue would have come from behemoth retailers making billions in profits…in short, the ones most able to afford the collection and remittance of these taxes.

Online-only retailers can sell items at a lower price — guaranteed to be 4-7% cheaper because they are exempt from having to collect sales tax.

This competitive advantage is fundamentally contrary to the principles of the free market system that have allowed America to thrive for so long. It also amounts to a government subsidy for certain online-only retailers…and it’s crushing local economies.

It only makes sense for online retailers to collect sales tax on purchases…as brick-and-mortar businesses in Virginia do every day.

Givens Books sells goods online, too.  I’m not opposed to online retailing.  On the contrary, it’s a great way to diversify your business model. However, the problem is that brick-and-mortar retailers are at a distinct disadvantage compared to online sellers. We pay property taxes, trash collection fees, electricity bill surcharges and other fees.  Online sellers do not.  And as state and local governments look for ways to make up for the lost sales tax revenue all of these other costs are likely to go up, further hurting local businesses.

Congress must pass the Marketplace Fairness Act and the Marketplace Equity Act, and give states the power to end the de-facto government subsidy for online retailers.

Danny Givens is the owner of Givens Books and Little Dickens in Lynchburg, VA.

Why I support online sales tax collection – it will help millions of small businesses like mine

Everyone seems to think that online sales tax collection is about large online companies, like Amazon, trying to crush small online businesses.

My experience as a small business owner has been exactly the opposite. State efforts at online sales tax collection have made it much, much easier to run my small business.

My wife and I own a small sheep farm in upstate New York offering for sale our livestock and wool products both online and at festivals and fairs in many states. Figuring out sales tax and filling out all the sales tax returns was, as you might expect, complicated and exhausting.

Just over two years ago I started using an automated sales tax service that handles sales tax calculation, collection, and remittance. It’s been a life-saver: no more trying to figure out if wool is in the same tax category in different states, no more filling out the wrong form, no needless hours spent looking up all the different sales tax rates and trying to figure out which one applies to which product.

I’ve since learned that automated sales tax services work with states and the Streamlined Sales and Use Tax Agreement (SSUTA), which states can voluntarily adopt to streamline sales tax processing for retailers. SSUTA states test and certify these sales tax management services making sure they function properly. I believe that even a small retailer using great software might have a hard time collecting sales tax for every tax jurisdiction in the country without the simplification measures set forth in SSUTA.

All of which leads me to the reason why I’m supporting the Marketplace Fairness Act and the Marketplace Equity Act, two bills that would grant states the right to require online sellers to collect sales tax, and hold them harmless for any errors that may occur.

The proposed legislation provides an incentive for states to simplify their sales tax laws, so that tax categories and definitions are standardized from state to state and there’s just one standard simplified electronic return for all states. These simplification measures make a huge difference for me, as I believe they would for all small business owners.

How do the two bills motivate states to simplify their sales tax laws? By making it a requirement of online sales tax collection. The bills maintain states can require out-of-state retailers to collect sales tax, but only if they make it simple for retailers to do so.

The bills don’t require states to adopt SSUTA’s guidelines, but they do require them to adopt SSUTA’s goal of making it simple for retailers to collect sales tax, and it requires them to accomplish some of the same goals as SSUTA (for instance, standardizing tax category definitions, so wool is in the same tax category in every state).

The combination of today’s freely available technology and states’ simplification efforts is a great benefit for small businesses like mine. It eliminates bureaucracy, promotes efficiency, and increases productivity and profitability. It makes dealing with sales tax much, much easier for small business owners.

Passage of S.1832 the Marketplace Fairness Act and H.R. 3179 the Marketplace Equity Act will prompt all states to simplify their sales tax laws. Therefore, I support these two bills.

To be clear, they do not create a new tax or raise taxes. They simply make collecting sales tax much easier for the millions of small business owners just like me. Consumers also benefit because they no longer have to self-track and remit the sales tax due on their individual state tax returns.

Congress, I urge you–enact the Marketplace Fairness Act and the Marketplace Equity Act.

Sten R. Wilson is a small business owner.  He runs Point of View Farm, which is located in the Mid Hudson Valley of New York.

Congress Should Allow Small Businesses to Compete on a Level Playing Field

In order to help the small businesses, the backbone of our national economy, and improve local economies all over the country, we desperately need to level the playing field for brick-and-mortar retailers.

We are currently competing against online-only retailers at a nearly 10% disadvantage due to an unfair loophole in the current sales tax system.  We must not only collect, but account for and remit sales tax – regardless of our size – while online retailers do not—even though purchasers (from them as well as from us) owe the tax.

Internet retailers claim they have no physical presence (or “nexus” under the law) in most states and therefore do not use services and should not have to collect sales tax.  But many have warehouses and distribution centers all over the country and make sales based on so-called affiliate relationships in every state every single day.  In my view, that’s a sufficient connection to the state!  They absolutely need to be made to compete on a level playing field.  Otherwise, brick-and-mortar retailers will not survive.  People take small businesses for granted, but no business can survive at a 10% disadvantage over time.  And should we not survive, the economy of the individual states and the country as a whole will suffer.

Brick-and-mortar businesses not only collect sales tax, they hire workers, pay their wages, pay payroll taxes, property taxes, and a myriad of other taxes.  As importantly, they engage in and support their communities in many ways: contributing to and participating in school, church and library events, volunteering to help neighbors in need, serving on boards and supporting everything from parks to public service programs.  As the long-time owner of a bookstore, I can testify that my business is an active participant in our community, working with schools, libraries and civic groups, helping teachers with their curricula, donating books and serving on boards in the arts and business communities, at schools and universities as well as the churches that we and our children attend.  We are a vital part of the communities in which live and work.

We may only employ 25 people (for whom we also provide health insurance) at the King’s English Bookshop, but we anchor a previously run-down neighborhood which, over the 35 years since we opened our doors, has added business after successful business.  Our neighborhood is now known throughout our city as a wonderful and walkable area.  Real estate prices are not only high but stable, even in the midst of the recession—we are a boon to the local economy.  And we are not alone.  Areas such as ours all across the state and around the country make for a vibrant economy and heart and soul of communities.

We aren’t asking for special favors; we are by our very nature fiercely competitive and we do just fine in a fair retail environment.  And that’s all we’re asking for—fairness.  There is no conceivable reason why our government should offer an unfair advantage to one segment of retail over another—especially a segment that gives little or nothing back to our economy or our communities.

Please, let the free market work the way it was meant to—on a level playing field.

Betsy Burton is a small business owner.  She runs The King’s English Bookshop in Salt Lake City and is the Co-Chair of Local First Utah.  Betsy is also a member of the Alliance for Main Street Fairness.

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